Qualifying interest in possession trusts ― IHT treatment

Produced by a Tolley Trusts and Inheritance Tax expert
Trusts and Inheritance Tax
Guidance

Qualifying interest in possession trusts ― IHT treatment

Produced by a Tolley Trusts and Inheritance Tax expert
Trusts and Inheritance Tax
Guidance
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This guidance note details the IHT treatment of qualifying interest in possession trusts on the death of the beneficiary or on a termination in their lifetime and explains the calculation in each case, including any exemptions that are available.

When a QIIP is charged to inheritance tax

Trust property, which is the subject of a qualifying interest in possession (QIIP), may become chargeable to inheritance tax on the following occasions:

  1. on the death of the beneficiary with the interest in possession

  2. on the death of the beneficiary within seven years after a transfer or lifetime termination of his interest

  3. on the transfer or conversion of the interest to a non-qualifying or discretionary interest during the beneficiary’s lifetime.

Property in which a QIIP subsists is not relevant property so it is not subject to principal (10-year) and exit charges during the life of the trust. See the Relevant property guidance note, and other notes in the ‘relevant property’ sub-topic for details of the relevant property tax

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